Agricultural Production Contracts Directive Awaiting Approval

The Federal Democratic Republic of Ethiopia (FDRE) Ministry of Agriculture is currently in the final stages of releasing a directive that aims to regulate contractual arrangements between producers and contractors. This directive is aimed at executing the Agricultural Production Contracts Proclamation No. 1289/2023. Once approved, the directive will govern the tripartite relationship involving agricultural producers, contractors, and third parties, along with their contractual agreements.

Significance of the Proclamation and Directive

Given the existing legal gaps in the entry, operations, and exit administration of agricultural production contracts, both the Proclamation and the forthcoming Directive hold immense importance. While the Civil Code provides a contractual framework that focuses on personal and private relations between contractors and producers. However, Proclamation No. 1289/2023 and the draft Directive take a more commercialized and market-oriented approach, particularly concerning the relationship between contractors and producers engaged in agricultural produce agreements.

Key Features Addressed by the Directive

The Directive, building upon the Proclamation, addresses several critical aspects:

  1. Identified Duties of Contractors: The legal duties of contractors can vary based on the specific contract type agreed upon with the producer. The Directive seeks to align these duties with the fiscal and technical needs of the producer, offering a modest reinterpretation of the contractor’s responsibilities.
  2. Contract Modifications: The Directive defines valid and justifiable changes to terms, prices, payment methods, and timelines within an agricultural production agreement. This clarity ensures smoother contractual processes.
  3. Compliance Deadlines: While the Directive acknowledges the need for compliance procedures and product deliveries, it does not specify timeframes for certain products. However, it underscores the necessity of proactive planning and adherence to deadlines.
  4. Quality and Quantity Sharing: The Directive stresses the necessity of indicating product quality and quantity responsibilities in the contractual agreements, and what constitutes the effects of default and non-performance, bifurcated to the contractor and the producer. 

As we await official approval from the Ministry of Justice, we anticipate that this comprehensive legal framework will enhance transparency, efficiency, and productivity within Ethiopia’s agricultural sector.

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